Vajpayee Thermal Power Station, Marwa” of Chhattisgarh ...

CHAPTER-2

2. Performance Audit of Power Sector Undertakings

Performance Audit on “Construction and Operation of Atal Bihari

Vajpayee Thermal Power Station, Marwa” of Chhattisgarh State Power

Generation Company Limited

Introduction

2.1 Chhattisgarh State Electricity Board (CSEB) was formed on

15 November 2000 to generate transmit and supply power in the State of

Chhattisgarh. In January 2009, CSEB was unbundled and activity relating to

generation of power was transferred to Chhattisgarh State Power Generation

Company Limited (Company), which was incorporated on 19 May 2003.

The CSEB appointed (22 December 2004) M/s Desein Private Limited, New

Delhi for preparation of Feasibility Report (FR) at a cost of ` 4.41 lakh for

setting up of Thermal Power Plant in Janjgir-Champa District who submitted

its report in February 2005. CSEB approved (March 2005) establishment of a

coal based 2X500 MW green field power project at Marwa in Janjgir-Champa

District of the State based on feasibility report. The justification for

establishment of Power Plant at Marwa as per feasibility report is as under:

i) Feasibility Report envisaged availability of 11,011.32 Million Units (MUs)

against demand of 15,146.04 MUs during 2005-06 which will increase to

33,945 MUs and 31,527.24 MUs respectively by 2011-12. To meet the

growing demand during next five years requirement of plant was felt.

ii) One of Power plant at Bhaiyathan which was under execution has become

uncertain due to local public resistance.

iii) Easy availability of water, rail and road link.

iv) Power Finance Corporation also agreed with the suitability of project site.

Accordingly, CSEB appointed (18 July 2005) M/s Desein for preparation of

Detailed Project Report (DPR) for the project at a cost of ` 5.51 lakh who

gave its report in May 2006. M/s Bharat Heavy Electricals

Limited (M/s BHEL) was appointed (17 August 2005) for preparation of

Environment Impact Assessment (EIA) Report at a cost of ` 28.65 lakh and

report was submitted by BHEL in January 2007.

Detailed Project Report envisaged demand of 18,834 MUs during 2005-06

against availability of 15,624.80 MUs which were estimated to increase to

38,982 MUs and 46,089.40 MUs respectively by 2011-12. On the basis of

DPR and EIA report CSEB accorded (January 2008) approval for awarding of

project. Against the estimated demand and availability of power as per DPR

actual were 18,908.53 MUs and 18,767.58 MUs respectively during 2011-12.

This indicates minor gap between demand and supply.

Chhattisgarh State Electricity Board decided (March 2008) to award the Main

Plant (Boiler, Turbine and Generator) work at a cost of ` 2,256.91 crore to

BHEL on the same techno commercial conditions on which National Thermal

Power Corporation Limited (NTPC) had placed order for 2X500 MW TPP

Audit Report on Public Sector Undertakings for the year ended 31 March 2018

24

Mauda project. However, important conditions relating to payment terms,

liquidated damages, delivery schedule and price variations ceiling were

adopted (March 2008) with modification. The agreement was executed with

BHEL on 10 September 2009. Similarly, work for Ancillary works

(Demineralised Water Plant, Cooling Tower, Coal Handling Plant and Ash

Handling Plant) was awarded at a cost of ` 1,633.71 crore to M/s BGR Energy

System Limited (BGR) in August 2009.

The cost of project as per DPR was ` 5,119.84 crore. The project was to be

completed on 30 November 2012 however, same was completed on

31 July 2016 with time overrun of three years eight months and cost overrun

of ` 3,772.67 crore upto 31 March 2019. The Project was subsequently

renamed (September 2018) as “Atal Bihari Vajpayee Thermal Power Station

(ABVTPS).”

Even after commissioning of the both the units of the Marwa Power Plant the

Company failed to achieve the objective of generation of at least 850 MW

(at 85 per cent PLF) per hour power it could generate only 575 MW per hour.

The main reasons attributable for non achievement of targeted generation

during 2016-19 were poor performance of the both the units due to installation

of defective turbine, non-availability of spare generator transformer and poor

quality of coal.

Organisational Setup

2.2 The Management of the Company is vested with a Board of Directors

(BoDs) comprising five directors appointed by the State Government. The day

to day operations are carried out by the Managing Director (MD), who is the

Chief Executive of the Company with the assistance of Executive Directors

(ED), Chief Engineers (who head each Station), and Superintending

Engineers. The Chief Engineer (Generation), ABVTPS is responsible for the

day-to-day operations of the plant.

Audit Objectives

2.3 The Performance Audit was carried out to assess whether:

Planning of project was adequate and effective to ensure that the project

was executed economically, efficiently and effectively.

The project achieved operational efficiency as per the prescribed norms/

standards.

Internal control and monitoring was effective and adequate.

Scope of Audit and Audit Methodology

2.4 The Performance Audit covered the planning, construction and

operational activities of the ABVTPS (2X500 MW), Marwa since “in

principle approval (2004-05)” for the project to operations of the project till

March 2018.

Audit methodology involved scrutiny of records maintained by the Company,

Chhattisgarh State Power Distribution Company Limited (CSPDCL),

Chapter 2 – Performance Audit of Power Sector Undertakings

25

Chhattisgarh Environment Conservation Board (CECB), and ABVTPS.

Analysis of data with reference to audit criteria and issue of audit

observations. Joint physical verification of assets created under the project was

taken up alongwith the Company officers. Besides, information available on

the official websites of Central Electricity Authority (CEA), Chhattisgarh

State Electricity Regulatory Commission (CSERC), Central Electricity

Regulatory Commission (CERC) and Ministry of Power, GoI were utilised.

The objectives, scope and methodology of the performance audit were

intimated to the Special Secretary, Department of Energy, Government of

Chhattisgarh (GoCG) on 10 January, 2019 but no response was received hence

no entry conference was held. The audit findings were reported to the

Company and GoCG on May 2019. The Exit Conference was held with the

Principal Secretary, Department of Energy and the MD of the Company on

15 May 2019. The reply of the Government was received in November 2019.

Views expressed by them in the Exit Conference and reply of the Government

have been considered while finalising the Performance Audit Report.

Audit acknowledges the cooperation extended by the Management in timely

completion of Audit.

Audit Criteria

2.5 The source of audit criteria adopted for achievement of the audit

objectives were:

Guidelines/norms/orders of Central Electricity Regulatory Commission

(CERC), Central Electricity Authority (CEA), Chhattisgarh State

Electricity Regulatory Commission (CSERC) and instructions of Ministry

of Power (MoP), Government of India (GoI) and Government of

Chhattisgarh (GoCG) with regard to construction and operation of thermal

power stations;

BoDs minutes and agenda papers, FR, DPRs, design specifications, project

implementation schedule, tender documents, agreements, Works

Department (WD) Manual; and

Environmental norms fixed by the Central Pollution Control Board

(CPCB), Chhattisgarh Environment Conservation Board (CECB) and

Ministry of Environment, Forest and Climate Change (MoEF&CC).

Audit Findings

The audit findings are discussed in the succeeding paragraphs.

Planning

2.6 In this part, audit findings related to deficiencies in planning of pre-

execution activities have been discussed:

Activity wise deficiencies noticed in planning have been discussed in

succeeding paragraphs:


26

Feasibility Study and Detailed Project Report

2.6.1 After conceptualisation of a project, feasibility study report is

prepared. This include site specification study, comments on statutory

clearances, size of the Thermal Power Plant (TPP), technology to be used, cost

estimates, financial analysis and investment approval of the project etc.

Thereafter, the DPR of the project is prepared.

The FR (February 2005) and DPR (May 2006) was prepared by

M/s Desein Private Limited (Consultant), who was selected1 on lowest tender

basis for which limited tenders were invited.

Audit observed (November 2018) that DPR was prepared in May 2006 while

EIA report was prepared by M/s BHEL2 in January 2007. However, it should

have been part of DPR.

Further, it was also observed that nature of available land was not correctly

envisaged at FR/DPR there were deficiencies in acquisition of land as

discussed below.

As per scope of work of consultant for preparation of DPR, Desk-top study

of maps was to be done by the consultant. There was no provision for

detailed survey for selection of site. Further, joint team of CSEB officers

and consultant visited at three locations3 and selected the Marwa site.

Accordingly, the consultant prepared the DPR. As per the DPR 80 per cent

land was barren and 20 per cent agricultural. However, the Company

neither conducted detailed survey nor verify the revenue records of land to

assess the nature of land. The Company acquired total 1,728.73 acre land

out of which only 283.77 acre (16.41 per cent) land was barren and

remaining 1,444.96 acre (83.59 per cent) was agricultural land. These facts

were verified4 (April 2019) by the Audit from the revenue records of

department in three days time. This could have been done by the Chief

Engineer (Civil-Project 1) abinitio. As a result 15 Rehabilitation and

Resettlement (R&R) issues, protest of land oustees, strike, kaamroko,

talabandi took place which hampered the project work.

The Government stated (October 2019) that total acquired land was

1,766.60 acre out of which 790.04 acre was barren therefore the actual

ratio of barren and agriculture land was 44.72:55.28.

The reply is not acceptable as the Company considered all government

land as barren though it was used for agricultural purpose. Hence, ratio of

agricultural and barren land was 83.59:16.41.

Similarly, as per the FR/DPR/EIA there was no forest land in project area.

However, while executing the project the Company had to acquire

282.57 acre forest land valuing ` 9.58 crore. This resulted in delay of three

years and six months in acquisition of 175.93 acre forest land for

alternative afforestation although it has no impact on commissioning of

plant.

1 In December 2004 for preparation of FR and in July 2005 for preparation of DPR.

2 Awarded cost was ` 28.65 lakh

3 Marwa, Jarwe and Kurda

4 Land acquired from Villagers/private parties.


27

The Government stated (October 2019) that identified land for project was

forest land.

The reply is not acceptable as during the preparation of FR/DPR/EIAR the

Company failed to identify that there was forest land.

As per GoCG order (8 September 2006) the government land was to be

allotted to the Company at a nominal cost of one rupee. The Company

acquired 755.63 acre government land from GoCG. However, the district

administration in respect of two villages5 out of 10 villages allotted land at

` 7.01 crore whereas in remaining villages, land was allotted at nominal

rate. Superintending Engineer (Land Acquisition), ABVTPS initiated the

payment and the same was approved by the Chief Engineer (Civil Project)

of the Company. Despite request of the Company this amount was not

refunded (May 2019) by the district administration leading to avoidable

additional burden on consumers.

While accepting the observation the Management stated (December 2018) that

process for refund of cost of land is under progress.

The District Land Acquisition Officer (DLAO) acquired 977.66 acre of

land which took abnormal time of more than one year in two cases6 of land

allotment, since receipt of application to award of order.

The Government stated (October 2019) that the delay in acquisition of

land after passing of award was due to non acceptance of compensation by

the concerned project affected persons.

Reply does not address the issue because audit has pointed out the delay

before award of order for land acquisition.

While granting (5 February 2008) Environment Clearance (EC) the

MoEF&CC, GoI directed that no land in excess of 1,254.76 acre shall be

acquired for any utilities/facilities relating to this project. However, in

violation of EC condition the CE (Civil Project) acquired (till April 2017)

total 1,728.73 acre land, against limit of 1,254.76 acre which was

38 per cent higher than the limit fixed for which no approval was obtained

from the MoEF&CC and reasons for the same were not on record resulting

in cost of project was increased by ` 63.32 crore. In such a situation the

MoEF&CC could revoke the clearance but no such action was taken.

The Government stated (October 2019) that total acquired land for

ABVTPS was originally conceived to accommodate expansion units under

the said project. Accordingly, 1,201.58 acre land was acquired for present

1,000 MW ABVTPS and remaining of land was acquired for expansion

unit of plant.

5 Taga and Pauna village

6 145.52 acre and 18.91 acre at Lachhanpur and Marwa respectively.


28

The reply is not acceptable as it seems to be an afterthought as neither in

DPR nor at the time of approval from MoEF&CC the Company mentioned

about the future expansion of plant. Further, the Company did not obtain

approval from MoEF&CC for excess acquisition of land.

Recommendation:

The Company should always assess and carry out the detailed survey of

land before proceedings for acquisition of land. It may also consider to

take action against responsible officials who failed to assess the nature of

land.

Contract Management

2.7 Contract Management includes inviting tenders, evaluation of tenders,

deciding the terms and conditions of the contract, award of work and

enforcement of terms and conditions of the contract. The Company executed

two major contracts valuing ` 3,890.62 crore7 relating to BTG and BOP

contracts on Engineering, Procurement and Construction (EPC) contract basis.

Deficiencies noticed in award of work, terms and conditions entered into and

non compliance of terms and conditions of contracts are discussed below:

Irregularities by Project execution management consultant

2.7.1 The Chairman of the Company approved (August 2008) to award the

work to M/s Development Consultant Private Limited (M/s DCPL) at a total

cost of ` 13.99 crore as Project execution Management Consultant (PMC) on

limited tender basis from the approved vendor list of Power Finance

Corporation (PFC).

The major scope of work of M/s DCPL was approval/review of

drawings/design, documents to be submitted by the BTG and BOP contractors,

quality surveillance and assurance, supervision, testing and commissioning of

the plant equipments and project monitoring from concept to completion.

Following irregularities were noticed on part of the consultant:

Approval of incorrect specifications of material led to non-installation of

Weigh Bridge

2.7.1.1 As per the work awarded to M/s BGR Energy System Limited

(M/s BGR), they are required to supply in motion weigh bridge for weighment

of coal received from South Eastern Coalfield Limited (SECL) through

railway infrastructure from Naila Railway station to plant yard. M/s BGR

submitted design for in-motion Weigh Bridge for 52 kg /mtr rail for approval

of M/s DCPL who approved (March 2012) the same without examining that

rail network is designed for 60 kg /mtr rail. Accordingly M/s BGR supplied

(August 2012) in-motion Weigh Bridge for 52 kg /mtr rail. Due to mismatch

in specifications in-motion Weigh Bridge could not be commissioned till

(May 2019). Further, SE (Fuel Management) also failed to notice the incorrect

specifications approved by the M/s DCPL due to lack of supervision. He also

failed to pursue the matter vigorously for procurement of required in motion

Weigh Bridge for early commissioning. It is pertinent to mention that cost of

7 BTG erection – ` 314.91 crore, BTG supply- ` 1,942 crore, BOP erection – ` 691.86 crore,

BOP supply- ` 941.85 crore


29

in-motion weigh bridge was ` 20 lakh only and the Company received coal

worth ` 1,681.52 crore during the period 2016-19 but same could not be

measured to ascertain coal lost in transit. The Chhattisgarh State Electricity

Regulatory Commission has specified norm of 0.50 per cent for coal lost in

transit.

The Government stated (October 2019) that the in-motion weigh bridge has

been installed and commissioning is in progress.

The fact remains that due to delayed installation of weigh bridge coal received

during three years period could not be measured.

Non-recovery of penalty of ` 19.71 crore

2.7.1.2 The Natural Draft Cooling Tower (NDCT)8 is a semi closed device for

evaporative cooling of water by contact with air. The main function of cooling

tower is to remove waste heat into the atmosphere from condenser.

Audit observed (January 2019) that as per technical specification M/s BGR

was to install 16 Automatic Valve less Gravity (AVG) filters in the NDCT but

only six AVG filters were installed up to January 2019. As required number of

AVG filters were not installed the required normative temperature i.e. 33°C

could not be maintained. This resulted in high temperature above the norm at

the outlet of cooling tower ranged between 0.28°C to 6.89

°C during the period

March 2016 to December 2018 (Unit-1) and 0.17°C to 4.36

°C during the

period February 2017 to November 2018 (Unit-2). The Company appointed

(7 April 2017) NTPC as third party for conducting Performance Guarantee

(PG) test. The PG test for Cooling Tower was conducted in the month of

October 2018 instead of during summer month defeating the objective of PG

test and the same was approved by the consultant even after its poor

performance, resultantly the cooling towers had failed to maintain outlet

temperature. The ED (PRG 1) failed to enforce the penalty of ` 19.71 crore9

as per the Letter of Award (LoA)10

so far (May 2019).

The Government stated (October 2019) that PG test was conducted by

M/s NTPC and test report confirms that the cooling towers are fully

complying with the terms and conditions of the contract document as well as

the designed characteristics of the said cooling towers.

Reply is not acceptable because PG test was conducted in October 2018 and

temperature of cooling towers were within the guaranteed outlet temperature

of 33°C. However, as per the contract agreement the same should be in all

weather conditions which it failed to maintain. Hence, the penalty of

` 19.71 crore was to be recovered from contractor as per contract.

8 NDCT are large concrete chimneys to introduce air through the media. The hot water is

introduced into the tower through spray nozzles approximately 10 m above the basin.

The main function of the spray zone is to simply distribute the water evenly across the

tower. The water passes through a small spray zone as fast moving droplets before entering

the fill. This significantly increases the surface area for heat and mass transfer. 9 ` 12.07 crore (` 35 lakh for every 0.2

°C x 6.9) for unit – 1 and ` 7.64 crore (` 35 lakh for

every 0.2°C x 4.37) for Unit – 2

10 ` 35 lakh for every 0.2°C or part thereof increase over and above the guaranteed

temperature of 33°C


30

Delay in approval of drawings

2.7.1.3 M/s DCPL took one month to 15 months for review/approval of

drawings11

result of which execution work was delayed.

Deficient terms and conditions of BOP and BTG contract

2.7.2 Works Department Manual, GoCG restricts advance against materials

brought to site by the contractor at 75 per cent of the value assessed by the

Engineer-in-charge. The recovery of such advances shall be made from each

succeeding running bill, to the extent of the materials that have been

consumed in the relevant finished item.

Audit observed (November 2018) that the Company accepted the terms and

conditions for supply of material under BOP contract as 90 per cent advance

against permissible limit of 75 per cent and only 10 per cent of the contract

price was linked with Commercial Operation Date (COD) and PG test. The

Company released bulk of the payment of ` 847.67 crore12

against due amount

of ` 706.39 crore13

before COD. Resultantly, the contractor showed very little

interest to complete the work in time because on schedule date of completion

of project (November 2012) 40.37 per cent work was completed.

Similarly, the terms and conditions for payment for BTG contract were

15 per cent interest free initial advance against Bank Guarantee, 60 per cent

progressive payment against proof of dispatch for supply, 20 per cent against

receipt of materials at site, 2.5 per cent on COD and 2.5 per cent Performance

Guarantee (PG) test for each unit. However, the Company released 95 per cent

on receipt of material at site against permissible limit of 75 per cent and only

five per cent of the contract price was linked with COD and PG test, and bulk

of the payment of ` 1,752.75 crore against due amount of ` 1,383.75 crore

was released before COD. Resultantly, the contractor showed very little

interest to complete the work in time because on schedule date of completion

of project (November 2012) 36.82 per cent work was completed.

The Government stated (October 2019) that progressive payment of

60 per cent was released to M/s BHEL to facilitate smooth execution of work.

Reply is not acceptable as the Company released 95 per cent payment against

the delivery of material at site to M/s BHEL. So, the bulk of the payment had

been released before COD, and the contractor showed less interest in

completing the project as he had already realised the profit element. This also

contributed to delay in completion of project.

Recommendation:

The Company should safeguard its financial interest while determining

the terms and conditions of the contract relating to release of advances in

future projects.

11

Relating to lightening protection lay out for CHP building, fire water pump house footing

layout, layout of ventilation fans/air conditioning plant room in TG building and ID system

foundation plan 12

` 941.85 crore x 90 per cent 13

` 941.85 crore x 75 per cent


31

Payment of interest free advances to M/s BHEL

2.7.3 As per Central Vigilance Commission (CVC) guidelines standard

benchmark advances should be interest bearing and recovery should be time

based and not linked with the progress of the work. Further, in other contracts

the Company provided interest bearing advances to the contractors.

Audit observed (November 2018) that the Company availed loan of

` 7,365.38 crore as on 31 March 2018 from M/s PFC to finance the ABVTPS

project. The rate of interest ranged between 9.90 per cent and 13 per cent. As

per terms of payment, the Company released (23 April 2008) ` 276.75 crore14

as interest free advance towards supply of material and ` 25.40 crore

(24 March 2009) as interest free mobilisation advance for the work of

erection, testing & commissioning to M/s BHEL. The Company recovered the

whole advance against supply in 3,347 instalments from the invoices furnished

by M/s BHEL during the period from February 2009 to June 2017 and

mobilisation advances in 345 instalments by February 2018. As per prudent

business practice, interest free advances to vendor should be avoided. PFC

loan being costly, the Company should have provided interest bearing advance

to M/s BHEL. This has resulted in extension of undue advantage to M/s BHEL

and consequent loss of realisable interest of ` 87.66 crore15

to the Company.

Though, mobilisation advances were paid to ensure speedy execution of the

work, the project was not completed in time. It is pertinent to mention that a

similar case had also been pointed out earlier in Audit16

.

The Government stated (October 2019) that CVC guidelines are neither

adopted by GoCG nor by the Company. Further, the Government stated that

by providing interest free advance to the bidders the Company has attracted

competitive bids at comparatively low price. The Government also stated that

NTPC in its Mauda project had given advance.

The reply is not acceptable as the Company should have followed CVC

guidelines as a best practice in absence of GoCG/Company’s guidelines.

Further, the reply regarding attracted competitive bids is factually incorrect

because the Company selected M/s BHEL on negotiation basis. Apart from it

the Company failed to follow the terms and conditions of the NTPC, Mauda

project where interest bearing advance was provided to M/s BHEL.

Acceptance of percentage contract

2.7.4 As per CVC guidelines standard benchmark consultant’s fee should be

fixed on the original contract value. In other case the Company limit the

consultant fees upto the contract value.

The Company awarded (December 2008) the work of engineering/

consultancy and supervision of BTG civil works and Chimney on cost plus

10 per cent of the contract value to M/s BHEL. The value of work order of

14 15 per cent of the value of contract i.e. ` 1,845 crore 15 Loss of interest ` 76.14 crore on supply advance i.e. ` 276.75 crore and ` 11.52 crore on

mobilisation advance i.e. ` 25.40 crore which was calculated at the rate of 9.90 per cent on

minimum rate of interest of loan availed from PFC. 16

Para 4.2.10.2 of Audit Report (Civil and Commercial) of CAG of India for the year ended

31 March 2010, Government of Chhattisgarh.


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BTG civil work and Chimney was ` 180.10 crore17

and the Company paid

` 194.82 crore including price escalation of ` 19.18 crore against the same.

This has resulted in additional cost burden of ` 1.92 crore as supervision

charges on price escalation. Had the Company adopted lump sum (Firm/fix

price) contract instead of percentage contract additional cost burdened could

have been avoided.

The Government stated (October 2019) that the CVC guidelines are neither

adopted by GoCG nor by the Company. The Government further stated that

the Company placed work order after getting approval of the Competent

Authority, which is comparable with the other similar orders and all sincere

efforts were made to have reasonable price for the BTG package as well as

execution of civil works under the contract.

The reply is not acceptable as the Company should have followed CVC

guidelines as a best practice in absence of GoCG/Company’s guidelines.

Further, the Government reply did not address the issue of acceptance of

percentage contract.

Recommendation:

The Company should award the consultancy works with long completion

period on firm price basis considering CVC guidelines as standard

benchmark.

Project Execution

2.8 The project execution includes effective actions to resolve bottlenecks,

ensuring quality control through different test for material used in the project,

ensuring that the work was executed as per terms and conditions of the

contract, deviation in achieving of milestone of various activities, if any is

duly approved by the competent authority.

Slippage of Project schedule

2.8.1 Board of Directors (BoDs) awarded (March 2008) BTG work to

M/s BHEL on negotiation basis. Notification of Award (NoA) was issued

(April 2008) for supply and erection of BTG package amounting to

` 2,256.91 crore18

and completion of Facilities/COD was to be achieved by

30 September 2012 and 30 November 2012 for Unit-1 and Unit-2 respectively

after change in zero date. However, there was no change in the date of

completion of facilities for supply of material.

Similarly, the Company issued (25 August 2009) LoA to M/s BGR for BOP

Package of the Project at a total cost of ` 1,633.71 crore19

with schedule

period of 30 months. Thus, the completion of facilities was to be achieved by

24 February 2012.

17

Order value of BTG Civil work was ` 156.19 crore + Order value of Chimney supply and

erection work was ` 23.91 crore 18

Supply ` 1,942 crore and for erection ` 314.91 crore 19

Supply ` 941.85 crore and for erection ` 691.86 crore


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The major milestones of the project, achievement there against and delay (if

any) is given in table - 2.1.

It is clear from the table that Unit-1 and Unit-2 of the project were delayed by

42 and 44 months respectively. The projects were being monitored at different

levels of management i.e. Project Manager at site, ED/CE (PRG 1), MD and

Chairman at Company’s Headquarters. At Headquarters level every month

progress of project as a whole was reviewed. It also discussed various issues

causing hindrances in the progress of projects and tried to resolve them along

with responsibility centres. Besides above, the Energy Department, GoCG and

MoP, GoI also monitoring the ABVTPS project to ensure its timely

completion. However, these meetings had no significant impact in containing

20

Delay was calculated on the basis of difference between target date and actual date of one

stage to next stage.

Table - 2.1: Details of major milestone of the Project

Sl.

No.

Major Milestones Unit-1 Unit-2

Target Actual Delay20

(in months)

Target Actual Delay

(in

months)

BTG Work

1 Commencement

of Boiler Erection 30-01-10 15-02-10 0 30-03-10 26-04-10 1

2 Erection of boiler

structure i.e.

Boiler drum lifting

31-08-10 06-08-10 -1 21-10-10 06-03-11 4

3 Commencement

of Condenser

erection

30-11-10 07-03-11 4 31-01-11 15-10-11 4

4 Hydraulic Testing

of Boiler 30-08-11 05-10-11 -2 30-10-11 06-09-12 2

5 Commencement

of TG Erection 21-12-11 23-02-13 13 21-02-12 02-12-13 11

6 Commencement

of TG Oil

Flushing

28-12-11 14-02-13 -1 28-02-12 29-03-14 4

7 Boiler ready for

testing 30-01-12 14-01-13 -2 30-03-12 08-05-14 0

8 Steam Blowing in

Boiler 31-03-12 26-10-13 7 31-05-12 03-09-14 2

9 Barring Gear i.e.

rotation of turbine

generator

21-04-12 09-11-13 0 21-06-12 17-01-15 3

10 Rolling and

synchronisation 26-05-12 21-12-13 1 28-07-12 31-03-15 1

11 COD 30-09-12 31-03-16 23 30-11-12 31-07-16 12

BOP work

1 Availability of

DM water 24-03-11 23-04-17

Completed

after COD 24-03-11 23-04-17

Completed

after COD

2 Readiness of

Cooling Tower 24-10-11 23-04-17

Completed

after COD 24-10-11 23-04-17

Completed

after COD

3 Coal Handling

Plant 24-02-12 01-05-17

Completed

after COD 24-02-12 01-05-17

Completed

after COD

4 Ash Handling

Plant 24-02-12 01-05-17

Completed

after COD 24-02-12 01-05-17

Completed

after COD

(Source: Data compiled with the records of the Company)


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delay in commissioning of ABVTPS project as Unit-1 and Unit-2 were not

completed within schedule time period. It is pertinent to mention here that in

spite of comment on delay in execution of projects being pointed out by

CAG21

, no corrective measures were taken by the Company. The main reasons

for time overrun are discussed below:

Delay in execution of agreement

2.8.1.1 As per clause 10.0 of NoA (April 2008), M/s BHEL was required to

prepare and finalise the contract documents for signing of the formal contract

agreement and shall enter into the contract agreement with the Company, as

per the proforma acceptable to CSEB, within 28 days from the date of NoA.

The CE (PRG 1) executed an agreement on 10 September 2009 with abnormal

delay of 16 months (after considering 28 days i.e. from 9 May 2008). The

reasons for such delay were attributable to delay in finalisation of scope of

work (Bill of Quantity) and terms and conditions of the contract for different

works which were to be carried out under the contract and delay in finalisation

of agency to carry out BTG civil works.

The Government stated (October 2019) that there was no impact of delay in

execution of agreement in the project execution as M/s BHEL started supply

of various items prior to execution of contract agreement.

Reply is not acceptable as in the absence of agreement there was significant

delay of 16 months in issuing essentiality certificate22

which caused delay in

supply of imported material by M/s BHEL and contributed in delay in

completion of milestone at further stage.

Delay in Supply of material

2.8.1.2 The supply of materials which were used in assembling of Boiler,

Turbine and Generator valuing ` 1,845 crore was to be completed upto

January 2012 and March 2012 for Unit-1 and Unit-2 respectively by

M/s BHEL. However, there was inordinate delay in supply of material due to:

delay in issuing essentiality certificate: After delay of 16 months in

entering into agreement with M/s BHEL, process for issuing essentiality

certificate was initiated. M/s BHEL initially applied for the essentiality

certificate with incomplete/ unsigned documents which were further

submitted with a delay ranging from one to nine months23

. The Chief

Engineer (PRG 1) forwarded the same to Energy Department with delay

ranging from one to five months, reasons for the same were not on record

and Energy Department issued essentiality certificate with further delay

ranging from two to eight months due to lack of pursuance by the Chief

Engineer (PRG 1) with the Department. Thus, total delay in issuing

essentiality certificates for different units24

of M/s BHEL ranged between

21

Para No. 4.2.9.2 of Audit Report (Civil and Commercial) of CAG of India for

the year ended 31 March 2010, Government of Chhattisgarh. 22

Essentiality certificate is required to avail concessional rate of custom duty on the imports

made for Power Projects. 23

Delay was considered after date of contract agreement i.e. 11 September 2009 instead of

date of original application submitted with incomplete documents by M/s BHEL 24

EDN Bangalore, HPBP Trichy, Piping Centre Chennai, HEEP Haridwar and Hyderabad

Pumps


35

three to 16 months.

delay in issuing of Material Dispatch Clearance Certificate25

(MDCC) of

M/s BHEL, Haridwar by the Chief Engineer (PRG 1) which ranged

between one to five months due to submission of incomplete documents

by M/s BHEL viz. test certificates, packing slip, etc. and delay in approval

of materials by M/s DCPL.

delay in receiving back, material26

transferred to other projects by

M/s BHEL viz. Korba West Extension, Damodar Valley Corporation

(DVC), Koderma, DVC Andal, Bhusawal, etc. The monitoring mechanism

of the Company failed in coordinating with main plant contractor to ensure

timely supply of critical equipment in case of ABVTPS project.

The Government stated (October 2019) that analysis of delay in supply is in

progress and appropriate action would be taken as per contractual provisions.

The Government further stated that due to requirement of additional

information from the Company or M/s BHEL for issuing essentiality

certificate, delay occurred.

Reply is not acceptable as audit has quantified the delay for issuing

essentiality certificate after considering time taken for additional information

and further clarification required.

Delay in awarding and completion of BTG civil works

2.8.1.3 As per recommendation of the negotiation committee (March 2008),

CE (Civil Project) was to finalise the tender for associated BTG civil works27

,

however, it failed to do so for which reasons were not on record.

Subsequently, same was included (September 2008) in the scope of

M/s BHEL as a result, zero date was shifted from 11 April 2008 to

31 December 2008 and completion period was also extended by nine months.

Further, M/s BHEL issued (24 August 2009) Letter of Intent (LoI) to

M/s Bridge & Roof Co. (I) Limited, (B&R) at a total contract value of

` 156.19 crore with scheduled completion period of 42 months from the date

of LoI. The work was to be completed by 23 February 2013 in all respect.

However, the BTG civil work was completed with abnormal delay of

46 months i.e. on 31 December 2016 due to protest of land oustees by

187 days in phased manner, delay ranged between one to nine months in

approval of drawings by M/s DCPL, deployment of inadequate manpower,

non-providing of fronts by BOP contractor and non-payment of price variation

bills by the Company.

The Government stated (October 2019) that there was procedural delay in

awarding of BTG civil work such as calling limited offers, getting approval

from higher authority etc.

The fact remains that there was significant delay of nine months in awarding

of BTG civil works by the Company to M/s BHEL and further delay of four

25

MDCC is an authorisation certificate for dispatch of materials from works to project site. 26

Material used for assembling of Boiler, Turbine and Generator such as ID fan blade and

motor, generator exciter, jacking oil pump etc. 27

Site leveling and grading, Civil, Structural and architectural job of power block and other

miscellaneous foundation and structures for Unit 1 and Unit 2


36

months by M/s BHEL in awarding work to M/s B&R. Further, reply does not

address the issue for delay of 46 months in execution of civil works.

Delay in awarding and completion of construction of 275 meter twin flue

Chimney

2.8.1.4 M/s BHEL awarded (September 2009) the work of construction of

275 meter high Reinforced Cement Concrete (RCC) twin flue steel lined

chimney for ` 24.81 crore to M/s Gannon Dunkerley & Company Limited

(GDCL), Kolkata but it was cancelled due to Chimney accident (23 September

2009) at BALCO, Korba being executed by GDCL. M/s BHEL re-awarded

(5 April 2010) work to M/s Prasad & Company Limited, Hyderabad after a

lapse of six months to be completed by November 2012. However, the same

was completed on 30 April 2014 with an abnormal delay of 18 months

attributable delays were, three months in casting of chimney raft mainly due to

non-providing of construction drawings for Plain Cement Concrete (PCC) by

M/s BHEL, delay of six months due to in casting of chimney shell and nine

months in structural erection mainly due to non availability of chimney slab

grade drawing by M/s BHEL, protest of land oustees and non-providing of

experienced engineer for flue cane28

and structural steel work by M/s BHEL.

While accepting the audit observation the Government stated (October 2019)

that appropriate action would be taken for delay as per contractual provisions

at the time of closure of contract.

Delay in completion of facilities under BOP contracts

2.8.1.5 As per agreement with M/s BGR various activities like availability of

De-mineralised (DM) water, readiness of NDCT, Ash Handling Plant (AHP)

and Coal Handling Plant (CHP) of the BOP package were to be completed

upto February 2012, however the same was completed with delay ranged

between 63 months and 74 months from schedule date of completion. The

main reasons attributable to delay in completion of BOP works are discussed

below:

Non deployment of adequate manpower: As per agreement M/s BGR

was required to adopt three shift working by deploying additional

manpower and resources however, the contractor had deployed less

number of manpower (1,800-1,900) at site against the requirement of

4,000 i.e. deployment was less than 50 per cent throughout the execution

period. The deployed vendors were not adequately equipped to carry out

the work in a time bound manner.

Delay in approval of drawings: The drawings were approved with delay

ranged between one to 15 months by the consultant (M/s DCPL).

Protest of land oustees: The total protest of land oustees of 187 days in

phase manner affected the execution of BOP work.

Delayed payment by M/s BGR: The Company processed and passed the

bills of M/s BGR in line with provision contained in the contract however,

28

A flue cane is a duct, pipe or opening in a chimney for conveying exhaust gases from a fire

place, furnace, boiler to the outdoors.


37

M/s BGR did not make payment to its sub vendor which affected the work

adversely.

Crusher house fire incident: Unit-1 was synchronised with coal for COD

on 23 June 2015 and the load was increased upto 300 MW. However, due

to fire accident occurred in the crusher house of coal handling plant on

14 July 2015, the COD of Unit-1 could not be achieved by the scheduled

time i.e. August 2015. It was observed that M/s Allen Engineering, as sub-

vendor of BGR, was not approved by CE (PRG 1) of CSPGCL and the

welding work was carried out without taking prior permission. M/s BGR

did not commission fire detecting and extinguishing system and CCTV

cameras for protection against such incidences. Further, despite having

excess29

manpower in the plant it could not watch the unauthorised

activities carried out by M/s BGR. The crusher house was restored on

22 February 2016 after more than seven months.

Thus, due to slow execution of work by M/s BGR critical civil works like

various floors of thermal plant, dust suppression of pump house, sewage

treatment plant, ash handling plant, coal handling plant and NDCT could not

be completed till commissioning of plant. The monitoring mechanism of the

Company could not ensure that such activities were carried out in timely

manner.


that appropriate action would be taken against M/s BGR as per contractual

provisions at the time of closure of contract. Further, the Company has taken

action against responsible officials by withholding the increments with

cumulative effects for fire incident.

Delay in commissioning of Unit-1 and 2 due to non-settlement of payment

issue with M/s BHEL

2.8.1.6 The Company decided (9 February 2016) COD of Unit-1 and 2 in the

month of February 2016 and March 2016 respectively. Accordingly, the

Company requested to M/s BHEL for engaging commissioning engineers to

complete balance work but M/s BHEL did not engage adequate

commissioning engineers for the same due to non-settlement of outstanding

payment of ` 65 crore. After assurance of the Company to release ` 32 crore

payment, M/s BHEL deployed the engineers. Finally, the COD of Unit-1 was

achieved on 31 March 2016 after the delay of one month.

Similarly, due to non-settlement of pending payment issue30

, M/s BHEL did

not engage adequate manpower to rectify the defect of Unit-2 in all respect

prior to COD of Unit-2. As a result the Company could not achieve the COD

of Unit-2 in March 2016. After vigorous persuasion by the Company,

M/s BHEL deployed the adequate manpower and same was achieved on

31 July 2016 after the delay of four months.

The Government stated (October 2019) that the decision of the Company to

29

Excess manpower for Class I (EE to ED) ranged between 1.34 per cent to 75.75 per cent,

for Class II (AE) 42.86 per cent to 295.45 per cent and for Class III (JE) 30.33 per cent to

173.12 per cent during the period from 2011-12 to 2016-17. 30

Due to disagreement between the both on payment of price variation.


38

withhold the payment of M/s BHEL was in the interest of the project

implementation.

The fact remains that due to non-releasing of payment by the Company COD

of Unit-1 and Unit-2 was delayed by one and four months respectively.

Impact due to delay in commissioning

2.8.2 The Commercial Operation Date (COD) of Unit-1 and Unit-2 was

scheduled in September 2012 and November 2012, however, the COD of

Unit-1 and Unit-2 were achieved in 31 March 2016 and 31 July 2016. Delay in

COD attributable to loss of generation, rebate on PFC loan, return on equity,

procurement of power at higher rates and interest beyond scheduled

completion date as discussed below:

The COD of Unit-1 and 2 of ABVTPS, Marwa were delayed by

42 and 44 months respectively, had Unit-1 and 2 were completed within

the scheduled period, considering the average generation of Unit-1 and 2

during the years 2016-17 and 2017-18, the Company could have earned

potential revenue from generation of 16,440.07 MUs amounting to

` 4,438.82 crore. Thus, slippage of schedule of COD of Unit-1 and 2 had

resulted in generation loss to the Company. It is pertinent to mention that

in spite of this issue being pointed out by CAG31

, no corrective measures

were taken for timely commissioning of plants.

The Government stated (October 2019) that BTG and BOP works were

awarded prior to issuance of Report by CAG. Hence, it is not relevant for

ABVTPS.

Reply is not relevant as in para no. 4.2.9.1 of Audit Report (Civil and

Commercial) of CAG of India for the year ended 31 March 2010, Audit

has pointed out generation loss due to delay in commissioning of project

which has no relevance to awarding of works.

As per policy in vogue, the PFC allows (August 2007) a rebate of

0.25 per cent in the interest rate for generation projects from the date of

commissioning of the first unit of the project. The Company was,

therefore, deprived of a rebate of ` 17.95 crore due to delay in

commissioning of Unit-1 by 42 months.

The Government stated (October 2019) that the project could not be

completed in scheduled time as project was green field project and there

were issues involved like rehabilitation and resettlement, land acquisition,

supporting infrastructure, water availability etc.

Reply is not acceptable as 307.75 acre land for construction of plant was

acquired (March 2008) before awarding of works (April 2008) and delay

in providing supporting infrastructure like rail infrastructure had no impact

on the completion of project as main plant and BOP work was not

completed on scheduled date. Further, due to strikes by land oustees

project was affected only for 187 days.

31

Para No. 4.2.9.1 of Audit Report (Civil and Commercial) of CAG of India for the year

ended 31 March 2010, Government of Chhattisgarh.

Time overrun in

commissioning of

ABVTPS resulted

in generation loss

of 16,440.07 MUs.


39

Clause 22.2 of CSERC (Terms and Conditions of determination of tariff

according to Multi-Year Tariff Principles) Regulation, 2010 stipulated that

in case of projects commissioned on or after 1 April, 2010, an additional

return of 0.50 per cent shall be allowed if such projects are completed

within 44 months from zero date for green field projects. Non completion

of the project within schedule time resulted in a loss of ` 3.16 crore32

on

account of return on equity.

The Government stated (October 2019) that compliance of CSERC MYT

Regulation, 2010 was not required as Unit-1 and 2 was to be completed

within 45 and 47 months from zero date in place of 44 months as required in

the CSERC provision.

Reply is not acceptable as for Unit-1 the Company did not make effort to

reduce the target schedule completion period by one month to achieve the

CSERC MYT Regulations. Further for Unit-2, Regulation allowed further six

months which was well within the scheduled completion period. However, the

Company could not complete the project within scheduled time.

The project was to be commissioned in the year 2012-13. However, the

same could not be achieved which resulted in procurement of power at

higher rates from private sectors by CSPDCL as the Company has entered

into power purchase agreement with CSPDCL. This had resulted in

additional cost of ` 315.92 crore33

to CSPDCL for energy during the

period 2013-14 to 2015-16 which was passed on to the consumers.

The Government stated (October 2019) that the CSPDCL procured the power

ranged between ` 2.55 per unit and ` 3.56 per unit to meet its shortfall. It was

also stated that rates of procured power were less than the generating cost of

ABVTPS.

Reply is not acceptable as the CSPDCL procured power from private parties

due to non completion of Marwa project in time by the Company. Further,

generation cost of ABVTPS increased to ` 4.16 per unit against range of

` 1.96 and ` 1.73 per unit as envisaged in the DPR due to cost overrun of

project on part of the Company.

The Company incurred loss of ` 1,317.60 crore34

towards avoidable

payment of interest during construction (IDC) from schedule date of

completion to actual date of completion (COD) due to delay in completion

of work.

Cost overrun

2.8.3 Due to delay in completion of the project, the actual expenditure

incurred by the Company upto 31 March 2019 was ` 8,892.51 crore (approved

cost by CSERC) against the original estimated cost of project of

` 5,119.84 crore and the Company had to incur additional expenditure of

` 3,772.67 crore. The components contributing to increase in cost are depicted

in the pie-chart as follows:

32 ` 6,317.70 crore X 10 per cent equity X 0.5 per cent 33

(Difference of rate per unit between DPR and actual) x procured power 34

` 2,994.54 crore x 44 months/100 months

The Company had

to incur additional

expenditure of

` 3,772.67 crore

towards cost

overrun due to

delay in

commissioning of

ABVTPS.


40

The main reasons attributable for cost overrun were as follows:

Increase in interest during construction (IDC) on PFC loan

The interest during construction (IDC) increased from ` 568.50 crore (as per

DPR) to ` 2,994.54 crore (i.e. 426.74 per cent). Reasons that led to increase in

IDC are discussed below:

Failure to infuse equity by the Company

2.8.3.1 The Company decided to avail 90 per cent of the estimated project cost

as loan and the remaining 10 per cent was to be infused from equity (own

sources/State Government contribution in equity).

During the period 2008-09 to 2017-18, the Company was to infuse 10 per cent

equity amount ranging between ` 418 crore (2008-09) and ` 900 crore

(2017-18) in the project.

Audit observed (December 2018) that due to non ensuring of infusing of

10 per cent equity before availing of loan from PFC and there was shortfall in

infusing equity which ranged between ` 12.99 crore (2013-14) and

` 458.19 crore (2011-12). Instead of investing 10 per cent from equity, the

ED (Finance) availed loan. As a result of this the Company had to bear

additional interest burden of ` 92.56 crore.

It was also observed that no effort was made by the Company to get equity

amount from GoCG till 2010-11 to reduce the cost of project, a request was

made to GoCG only after August 2011.

The Government stated (October 2019) that there was no compulsion

regarding infusing 10 per cent equity upfront before availing loan from PFC as

per loan sanction order of the PFC.

Reply is not acceptable because as per prudent business practice before

availing loan, fund was to be arranged from own sources to minimise availing

of loan and interest burden thereon. However, the Company neither carried out

exercise to assess the availability of funds to infuse 10 per cent equity nor

efforts were made to obtain equity from GoCG till 2010-11 to avoid the

additional interest burden.


41

Downgrading in rating of the Company

2.8.3.2 For the purpose of funding PFC categorised State Power Generation

Companies based on the evaluation of utility’s performance against specific

parameters covering operational and financial performance including

regulatory environment and audited accounts.

Audit observed (January 2019) that during the period from 16 February 2012

to 12 September 2012 rating of Company was downgraded from A+ to B due

to compliance of previous year’s statutory provision in respect of employee

cost which resulted in loss to the Company in the year 2010-11 for which the

PFC charged additional 0.50 per cent rate of interest on disbursed loan. Later

on, the rating of Company was upgraded from B to A since

13 September 2012 and the same was retained till 6 October 2013. As a result,

the PFC reduced additional rate of interest to 0.25 per cent on disbursed loan.

Again rating of Company was downgraded from A+ to B during the period

1 October 2014 to 30 September 2015 due to loss to the Company during the

year 2013-14 as there was underutilisation of plant capacity, for which PFC

charged 0.50 per cent additional interest on disbursed loan. Resultantly, the

Company had to bear additional interest burden of ` 18.01 crore and also

incurred avoidable financial burden on ABVTPS to the same extent.

The Government stated (October 2019) that loss to the Company during the

year 2010-11 is mainly due to statutory provisions required to be made in

accounts in compliance to accounting standards and in 2013-14 it is due to

true up order by CSERC and generation loss.

Reply is not acceptable as the Company incurred loss during the year 2010-11

as it made provision for retirement benefits of previous years. As regard loss

during the year 2013-14 profit after tax was negative even after considering

true up order of CSERC.

Increase in cost of BTG and BOP works

2.8.3.3 The cost of BTG supply and Erection, Testing and Commissioning

(ETC) work increased from ` 2,437.01 crore (as per awarded value) to

` 2,666.91 crore (i.e. 9.43 per cent). The main reason for increase is payment

of price variation in contract period.

Similarly the cost of BOP supply and ETC work increased from

` 1,902.05 crore (as per awarded value) to ` 2,208.57 crore

(i.e. 16.12 per cent). The main reasons for increase are payment of price

variation of ` 116.88 crore paid as per terms and conditions contract and

construction of approach road ` 1.42 crore. The issue of non-availability of

encumbrance free land led to avoidable expenditure of ` 1.42 crore on

construction of approach road is discussed below.

Without acquiring the required land for construction of approach road, the

Company issued (May 2012) work order valuing ` 2.34 crore for construction

of road. The contract was rescinded (February 2013) due to non-availability of

hindrance free land by the time contractor had executed work valued

` 13 lakh. Subsequently, the work order was issued35

(March 2014) against

35

M/s Asha Construction, Raipur


42

the land already acquired by the Company at a total financial commitment of

` 2.01 crore. Further, the Company issued36

(June 2014) another work order at

a total financial commitment of ` 1.75 crore after acquiring the balance land.

Had the Company acquired the land before awarding the contract, extra

expenditure of ` 1.42 crore could have been avoided.

The Government stated (October 2019) that at the time of awarding of work,

the entire land could not be taken over due to resistance of the villagers.

Further, contractor did not commence the work on the available land. Hence,

the contract was rescinded and fresh contract was awarded.

Reply is not acceptable as land acquisition problem arose due to acquisition of

land without conducting any detailed survey which resulted in avoidable

expenditure of ` 1.42 crore.

Increase in cost of land acquisition and R&R

2.8.3.4 The land acquisition and R&R cost was considered at ` 71.66 crore in

the DPR, however the actual expenditure incurred was ` 174 crore

(i.e. 142.81 per cent) which comprising of ` 125 crore on land and ` 49 crore

on R&R. The main reasons for increase in cost of land was excess acquisition

of land, difference in rate of agricultural and barren land and excess

expenditure incurred on settlement of R&R due to payment of compensation

at higher rate.

Recommendation:

The Company should ensure timely execution of new thermal power plant

through better planning, close monitoring and close follow up with

contractors and consultants to avoid time and cost overrun and

consequent loss of generation.

Non recovery of liquidated damages from the contractors

2.8.4 Though the contractors completed the works after 42 and 44 months of

the scheduled date, no liquidated damages (LD) were recovered as stipulated

in the contract for delay of 13 months on the part of M/s BHEL due to delay in

awarding of BTG civil works and supply of materials and 16 months by

M/s BGR due to non-deployment of adequate manpower. It is pertinent to

mention that in spite of being pointed out by CAG37

no lessons were learnt.

This led to undue financial benefit of ` 339.31crore38

to the contractors.


that the applicability of LD would be ascertained after finalisation of delay

analysis which is under progress.

Project commissioned with incomplete ash handling plant

2.8.5 Electrostatic precipitator (ESP) is a particulate removal device that

removes suspended particulate matter from combustible products using an

36

M/s Shankar Engineering Works, Korba 37

Para No. 4.2.9.1 of Audit Report (Civil and Commercial) of CAG of India for the year

ended 31 March 2010, Government of Chhattisgarh. 38

BTG contract ` 1,845 crore (contract value excluding tax and duties) X 10 per cent =

` 184.50 crore and BOP contract ` 1,548.09 crore (contract value excluding tax and duties)

X 10 per cent = ` 154.81 crore.

The Company

extended undue

benefit of

` 339.31 crore to

contractors due

to non-recovery

of liquidated

damages.


43

electrostatic force. The installation work of ESP was in the scope of

M/s BHEL.

Scrutiny of progress report (March 2016) revealed that the work of AHP

remained incomplete even after COD. As AHP was not ready completely, the

ash generated at boiler accumulated inside the ESP casing much beyond the

capacity of ESP. Since, one pass was damaged completely, it was required to

be replaced with new one. M/s BHEL refused (July 2016) as per terms of

contract to rectify the defect as same was due to fault of the Company because

the Company commissioned the plant with incomplete AHP. This has resulted

in avoidable expenditure of ` 4.25 crore on replacement/repair of ESP.

The Government stated (October 2019) that the commissioning of Unit-1 and

2 was done only after completion of ESP and Ash Handling System.

Reply is factually incorrect because as on COD, AHP was not fully completed

which was completed on 1 May 2017.

Recommendation:

The Company should start commercial operation only after ensuring

completion of all facilities to avoid damage to equipments.

Non-compliance of Chhattisgarh State Electricity Grid Code

Improper trial run

2.8.6 The CSERC published (December 2011) Chhattisgarh State Electricity

Grid Code 2011 (Grid Code 2011). It prescribed that trial run shall be carried

out i.e. running of generator continuously for 72 hours. The Company39

declared COD of Unit-1 and Unit-2 from 00:00 hrs of 31 March 2016 and

at 00:00 hrs of 31 July 2016 respectively. Audit observed (January 2019) the

following irregularities with respect to COD of the project:

Unit-1 of ABVTPS was run for 108 blocks of 15 minutes continuously and

not for a continuous required period of 72 hours i.e. 288 blocks of

15 minutes each at its installed capacity.

Grid Code 2011 stipulated that the short interruptions, for a cumulative

duration of four hours, should be permissible and more than four hours

should call for repeat of trial operation or trial run. However, the

cumulative interruption in Unit-1 and Unit-2 during the period of trial run

was 173.25 hours and 14.25 hours respectively. The Company neither

opted for repeat trial nor derated the capacity for Unit-1 and 2.

The units of thermal Generating Station shall also demonstrate capability

to raise load upto 105 per cent of its Installed Capacity (IC). The Unit-1

recorded maximum of 505.02 MW (29 March 2016 00:24:46 hrs) and

504.38 MW (29 March 2016 00:31:14 hrs). Thus, the unit ran at its full

capacity for a total period of 18 minutes only (i.e. 00:31:14 hrs minus

00:13:37 hrs). The Unit-2 ran for 502 MW for only 1 block (27 July 2016

at 04:30:00 hrs). Both the units did not raise load upto 105 per cent of IC.

Grid Code 2011 provided that the generating Company shall certify that

39

Chief Engineer (C&CP) and ED (Gen) declared COD for Unit-1 and Unit-2 respectively.

The Company

declared COD of

ABVTPS in

violation of

CSERC

Electricity Grid

Code 2011.


44

the generating station meets the relevant requirements and provisions of

the Grid Code 2011, BOP auxiliaries40

have been commissioned and are

capable of full load operation. The Company did not certify COD as

required. Many important works such as Turbine Driven Boiler Feed

Pump (TDBFP) 2B, Hydrogen Generation Plant, Fire fighting system,

Effluent Treatment Plant (ETP), AHP, Chlorination system and CHP were

not commissioned.

The certificates were required to be signed by the Chairman and MD/Chief

Executive Officer of the generating Company and a copy of the certificate

was to be submitted to the Member Secretary of the concerned Regional

Power Committee and concerned Regional Load Dispatch Centre

(RLDC)/State Load Dispatch Centre (SLDC) before declaration of COD.

But the certificate for COD was signed by the Chief Engineer

(Commercial & Corporate Planning) and ED (Generation) for Unit-1 and

Unit-2 respectively and submitted to the Chief Engineer (SLDC). Nothing

was found on record to show that a copy of the certificate was submitted to

the Member Secretary of the Western Regional Power Committee as

required in the Grid Code 2011.

The respective RLDC/SLDC was required to notify the clearance within

seven days of receiving the generation data or else inform the generating

Company of any deficiency in the trial run operation. But the

RLDC/SLDC did not inform the generating Company of the deficiencies

in the trial run operation as pointed above.

Though the RLDC was empowered in the Grid Code 2011 not to schedule

the unit station in the event of non-compliance of any of the provisions of

Grid Code 2011, it did not object to commissioning of Unit-1 and 2.


that trail run of Unit-1 was conducted subsequent to declaration of COD.

Expenditure on non-utilisation of assets created

Infructuous expenditure of ` 1.37 crore on construction and maintenance of

Temporary Bund at Marwa

2.8.7 The Executive Engineer (Civil 1), ABVTPS Project proposed

(January 2012) to construct a coffer bund across Hasdeo River at downstream

of intake pump house of the project as trial run was scheduled in March 2012.

LoA for the subject work was issued41

(March 2012) and work was completed

(4 January 2013) at a cost of ` 28.58 lakh.

The BoDs of the Company accorded approval (June 2013) for construction of

a temporary earthen bund near intake pump house on Hasdeo River and

maintaining the same for a period of three years at an estimated cost of

` 1.45 crore to save ` 78.52 crore against water charges. Accordingly, tender

was invited42

by and work was awarded (September 2013) for construction

40

Fuel Oil System, Coal Handling Plant, DM Plant, pre-treatment plant, fire-fighting system,

Ash Disposal system 41

EE (Civil) under office of ED (Civil Project) 42

ED (Civil Project)


45

and maintenance of the said bund for ` 1.08 crore. The work was completed in

24 February 2014 at the cost of ` 1.08 crore.

In this connection, audit observed (November 2018) that major works such as

Boiler light up, TG Box up, synchronisation and CHP were incomplete at the

time of decision for construction of temporary bunds. Without completion of

above mentioned work, commissioning of Units were delayed. As such,

decision for construction of temporary bunds without synchronising with

completion of plant works lacked justification. Further, no record was found to

show that any water was drawn from the temporary bunds. As temporary bund

was constructed on 24 February 2014 and COD was achieved in

March 2016/July 2016, so at the time of completion of construction of

temporary bund project was in under progress therefore, there was no use of it.

This had resulted in infructuous expenditure of ` 1.37 crore.

The Government stated (October 2019) that proposal to construct and

maintain temporary bund was initiated to meet the requirement of water

during pre commissioning and testing activities.

Reply is not acceptable as water requirement for pre-commissioning activities

was fulfilled from the Choutaria Nala and no water was utilised from

temporary bund. Hence, there was no need to construct temporary bund.

Non-completion of Over Head Electrification (OHE) work led to idling of

Railway line valuing ` 68.76 crore

2.8.8 The Company awarded (March 2008) the work of Project Management

Consultancy Contract to M/s RITES who awarded contracts in six packages

for Rail Infrastructure to the contractors.

The work under package IV for OHE was awarded (February 2009) to

M/s Traxun Towers by M/s RITES at a cost of ` 10.46 crore. However,

encumbrance free site was handed over (November 2013) by the Company.

Accordingly, the schedule date of completion was extended to July 2014. The

work of OHE could not be completed till (May 2019) due to non-completion

of OHE wire stringing work. The contractor did not execute the balance work

and requested for short closure of the work as the work was to be completed

by April 2014 but due to delay in getting site clearance from Railway, Rail

Over Rail (ROR) Bridge work remained incomplete by the Company till

(May 2019).

The Company had already spent an amount of ` 183.19 crore till December

2018. But due to non-completion of balance work of OHE the Company was

forced to use the single line i.e. the return line for both loaded and empty

rakes. Thus, out of total railway line of 24.96 kilometer (km) only 15.59 km of

the railway line could be utilised by the Company (i.e. 62 per cent). A total of

9.37 km (38 per cent) of railway infrastructure costing ` 68.76 crore43

remained idle (May 2019) even after three years of COD of the units.

43

Cost of unused rail infrastructure = ` 183.19 crore (total cost)/24.96 km (total length of

railway network) x 9.37 km (unused part of railway network)

The Company could

not utilise 9.37 km

railway line costing

` 68.76 crore due to

non-completion of

overhead

electrification work.


46

The Government stated (October 2019) that OHE work was delayed due to

delay in land acquisition, strike by villagers and delay in grant of block by

Railway for ROR. The Government further stated that presently OHE work is

under progress.

Reply is to be seen in the context that acquisition of land was done without

conducting any detailed survey and the Company did not pursue the matter

vigorously with Railway till COD to obtain grant of block.

Recommendation:

The Company should get the associated work completed within scheduled

time to synchronise the system.

Unfruitful expenditure of ` 2.99 crore on automatic signalling system

2.8.9 M/s Vijaywargi Infra Engineers Private Limited was awarded the work

of Signalling and Telecommunication (S&T) by M/s RITES. The work was

completed (February 2016) at a cost of ` 2.99 crore. M/s RITES successfully

commissioned and handed over the S&T system to CSPGCL on

24 February 2016.

Audit observed (December 2018) that since inception the Company knew that

manpower to be deployed for operation and maintenance of S&T system.

However, the Company neither deployed own staff44

for training45

nor

engaged manpower through outsourcing to operate the system. The Company

requested (24/02/2016) to RITES to close down the automatic signalling

system. The system was operated manually from the date of handing over to

till May 2019. Despite spending of ` 2.99 crore on automatic signalling

system, objective of faster, reliable and safer train movement remained

unfulfilled. The same was further established by photograph as follows which

was taken during joint physical verification (December 2018).

44

Superintending Engineer (Civil) Circle-1, requested (23/02/2016) Superintending Engineer

(Services) to deploy staff. 45

As offered by M/s RITES (Project Management Consultant) on 02/02/2016.

Incomplete wire stringing work


47

Steel apparatus case of automatic signalling system lying demolished at railway line

between stretch of Bridge no.17 and null point of cutting section.


that initiative has been taken for deploying the trained manpower for operating

the same.

Non-utilisation of procured materials

2.8.10 As per terms of payment the contractor was paid 90 per cent of the

value of material supplied at site after issue of MRC. In this regard audit

observed (January 2019) that material valued at ` 2.11 crore remained

unutilised till date (May 2019) after lapse of 34 months is given in table - 2.2.

Table - 2.2: Statement showing unutilised items

Sl.

No.

Item Value

(` in crore)

1 0.52 lot Hoisting equipments out of one lot 1.48

2 One conveyor belt vulcaniser out of two 0.18

3 One Elevator (lift) out of two 0.45

Total 2.11

(Source: Data compiled from the records of the Company)

Non-installation of these materials resulted in idle investment of ` 2.11 crore

besides operational problems in day to day work. As the above materials were

supplied during the period March 2012 to March 2014 and more than four

years had passed by, the guarantee/warranty period of the equipment expired.

This shows that the contract enforcement by the SE (CHP) was extremely

poor.

The Government stated (October 2019) that action is being initiated to ensure

utilisation of procured materials. The Government further stated that LD

would be levied as per contractual provisions after delay analysis.

Other issues

Delay in unloading of coal from wagons resulted in avoidable payment of

demurrage charges of ` 1.15 crore

2.8.11 The Company arranged unloading of coal by placing (1 April 2016) a

work order to M/s Neelkantham Systems Private Limited, Korba (Contractor).

As per the work order, the wagons were to be unloaded within the scheduled

time of 2 hours 15 minutes. In case of delay in unloading the wagons, penalty

at the rate of ` 150 per wagon per hour or at the prevailing rate as notified by

South Eastern Central Railway (SECR) from time to time shall be imposed


48

and recovered from the Contractor.

Audit observed that during the period from March 2016 to May 2019, the

Company paid ` 1.46 crore on account of demurrage charges to SECR on

account of delay in unloading of coal wagons, however, the Company could

recover only ` 0.31 crore from the Contractor and remaining amount of

` 1.15 crore was borne by Company due to poor monitoring of SE (CTD). The

main reasons for delay in unloading of coal from wagons were due to problem

in coal feeding and conveying or crushing system, big lumps of coal/shale

which stuck-up wagon gate and hopper grill causing jamming and restriction

in coal evacuation/unloading process.

The Government stated (October 2019) that restoration after crusher house fire

accident and re-commissioning of other auxiliaries of CHP had taken

considerable time for stabilisation which caused payment of demurrage

charges. The Government further stated that demurrage charges have been

reduced considerably in the year 2018-19 even after receipt of more coal in the

year.

Reply is not acceptable because the audit considered the demurrage charges

only after restoration of crusher house fire accident. The fact remains that

major amount ` 98 lakh was paid as demurrage charges prior to 2018-19.

Non-obtaining of credit note of ` 66.08 crore from SECL

2.8.12 As per the Fuel Supply Agreement (FSA) available on Coal India

Limited (CIL) website samples of coal shall be collected jointly by manual

method during each of the shifts and at each of the delivery points for

determining the quality of coal provided. As per the joint sampling of coal

inspection clause, in case of any dispute with regard to grade of the coal, it

was to be referred to a third party and decision of the third party would be

final. Council of Scientific and Industrial Research-Central Institute of Mining

and Fuel Research (CIMFR) was third party. The credit note on grade slippage

was to be issued by the SECL within seven days of acceptance of results under

joint signature.

Audit observed (December 2018) that as per analysis of CIMFR there was

grade slippage of coal received from SECL during the month of December

2016 to December 2018. Accordingly, the Company was to receive credit note

for ` 95.34 crore from SECL within seven days in succeeding month of

respective month. However, the Company started claiming of credit note from

SECL from September 2018. Thus delay in persuasion of matter by the SE

(Coal Transport Division) with SECL and credit note has not been received

(May 2019) amounting to ` 66.08 crore. Further, the reason for delay in

payment of credit note by SECL was also not on records.


that after being pointed out by audit consistent persuasions were made to bring

down the outstanding credit note amount resulted in reduction of credit note

amount from ` 66.08 crore to ` 62.63 crore up to July 2019. Further, the

Government stated that if SECL would not adjust credit note, the Company

would withheld payment equal to amount of credit note from their bills.


49

Delay in execution of agreement with Water Resources Department (WRD)

resulted in penalty of ` 4.47 crore

2.8.13 Total water requirement for 2X500 MW ABVTPS Marwa was to be

met from the Hasdeo River flowing by the side of the project. The flow water

requirement was about 35 Million Cubic Meter (MCM)/year.

Audit observed (January 2019) that initially, the Company was allotted

60 MCM/year which was reduced to 35 MCM/year in December 2016.

However, the Additional Chief Engineer (Operation and Maintenance) did not

execute any agreement with WRD till May 2017. In absence of agreement,

drawal of water was treated as unauthorised and illegal. Resultantly, the

Company had to bear penal water charges to the tune of ` 4.47 crore being

thrice46

the normal rate47

during the period February 2017 to May 2017.

The Government stated (October 2019) that the matter is being pursued with

WRD to waive off the penalty.

Recommendation:

The Company should execute the agreement timely so that penalty could

be avoided.

Operational Performance

2.9 The pictorial representation of generation of electricity by a thermal

plant is depicted below:

In a thermal plant, water is taken initially into the boiler from a water source.

The boiler is heated with the help of coal. The increase in temperature helps in

transformation of water into steam. The steam generated in the boiler is sent

through a steam turbine. The turbine has blades, which rotate when high

velocity steam flows across them. This rotation of turbine blades is used to

generate electricity. A generator is connected to the steam turbine. When the

turbine rotates, electricity is generated and given as output by the generator,

46 ` 16.50/Cum 47 ` 5.50/Cum


50

which is then supplied to the consumers through high voltage power lines.

Operation efficiency of the power generating station is dependent on Plant

Load Factor, plant availability, capacity utilisation, outages, auxiliary

consumption and oil consumption. These aspects have been discussed below:

Non-achievement of generation target

2.9.1 The annual targets for generation of energy were fixed by the CSERC

after considering the planned outages during the year.

Table - 2.3 depicts the details of installed capacity, target fixed and actual

generation during the period April 2016 to March 2019.

Table - 2.3: Installed Capacity vis-à-vis actual generation

Unit Year Installed

Capacity

Target Fixed by

CSERC

Actual Generation Shortfall

(MUs) (MUs) PLF

(per cent)

(MUs) PLF

(per cent)

(MUs)

Unit-1 2016-17 4,380 3,723 85 294.10 6.70 3,428.90

2017-18 4,380 3,723 85 2,739.90 62.60 983.10

2018-19 4,380 3,723 85 2,945.96 67.26 777.04

Unit-2 2016-1748

2,928 2,488 85 2,326.20 79.50 161.80

2017-18 4,380 3,723 85 2,980.00 68.00 743.00

2018-19 4,380 3,723 85 3,471.31 79.25 251.69

Total 24,828 21,103 14,757.47 59.44 6,345.53

(Source: Data compiled from the Company’s records)

Audit observed that shortfall of 6,345.53 MUs valuing ` 1,713.29 crore. The

major reason as identified and reported by the Management49

for shortfall in

achieving generation target was high rate of outages as discussed below:

Outages refer to the period for which the plant remained closed for

attending planned/forced maintenance. Total number of hours lost due to

planned outages increased from 275 hours in 2016-17 to 1,313.84 hours in

2018-19. Forced outages ranged between 8.70 per cent and 60.43 per cent

during the period 2016-19. Main reasons for higher outages noticed in

audit are as under:

Installation of Defective Turbine

2.9.2 The turbine box up for Unit-1 was completed in February 2013 and

Unit-1 was synchronised (20 December 2013) with fuel oil. Thereafter, Unit-1

was re-synchronised and load was raised (30 March 2014) to 500 MW with

coal. On both the occasions Unit-1 tripped due to TG shaft vibration and unit

did not come on stable condition as it is a tendency for the turbine shaft to

deflect or bend if allow to remain in one position too long. The Unit-1 could

not be operated during 14 July 2015 to 22 February 2016 due to fire accident

in the crusher house and thus achieved COD with effect from 31 March 2016.

The Unit-1 tripped 18 times during the period 14 March 2016 to 2 May 2016

due to the turbine problem. The site engineers of M/s BHEL made several

attempts to resolve the matter at their level but failed. Therefore, M/s BHEL

declared (28 August 2016) that the turbine was not fit for operation. The

turbine was sent for repair to M/s BHEL, Haridwar (30 September 2016) and

48

31 July 2016 to 31 March 2017 49

Executive Engineer (Operation), ABVTPS, Marwa

The Company could

not attain the

generation target and

there was shortfall in

generation of 6,345.53

MUs power valuing

` 1,713.29 crore due

to high rate of

outages.


51

was put back into operation w.e.f. 12 March 2017. Unit-1 was under shutdown

during the period 2 May 2016 to 12 March 2017 (314 days). Further, despite

repair by M/s BHEL the problem persisted and the Unit-1 was put under shut

down on six occasions till December 2018.

In this connection, audit observed (January 2019) that the Unit-1 tripped

24 times since March 2016 to till date of audit (December 2018). A number of

studies were carried out by both M/s BHEL and the Company to find out the

exact reason for such high vibration, however the exact reason could not be

ascertained till date of audit (January 2019) which indicated that M/s BHEL

supplied and installed defective turbine valuing ` 89.94 crore at ABVTPS

Marwa. Due to inherent defect in turbine, the Company was forced to operate

the Unit-1 at restricted load ranging between 150 MW to 416 MW and

incurred loss of ` 198.13 crore on account of partial loss of 736.84 MUs and

chances of such partial loss during the designed life span of the Unit-1 could

not be ruled out.

The Company despite being aware of the high vibrations in the turbine since

first synchronisation of Unit-1 in December 2013, it neither insisted

M/s BHEL for replacement of the defective turbine though stipulated in the

contract nor took up the matter through Energy Department, GoCG. Inspite of

provision for arbitration in the contract, the Company did not file any

arbitration case against M/s BHEL.

The Government stated (October 2019) that the defects noticed in the turbine

generator shaft were conveyed promptly to M/s BHEL to resolve the problem.

Due to non-resolving the problem, the Company had decided to send the HP

turbine to the works of M/s BHEL at Haridwar to identify the problem. The

Government further stated that the vibration problem in turbine has been

rectified (March 2019).

Reply is not acceptable as the Company was aware with the vibration problem

in the turbine since first synchronisation (December 2013) but it could not take

any action to rectify the same in three years till COD. Further, the Company

had to bear generation loss of 4,654.35 MUs50

valuing ` 1,256.67 crore51

till

March 2019 due to vibration problem in turbine.

Outages due to non availability of spare GT

2.9.3 M/s BHEL, Bhopal had supplied (April 2013) seven Generator

Transformers (GT) for ABVTPS, out of which six GTs (three each) were

erected and commissioned in Unit-1 and Unit-2. One GT was kept

(Sl. No. 6006970) as a spare to deal with any emergent situation and the same

would be replaced with defective GT.

On joint verification of the Company and M/s BHEL (December 2015), the

core52

of spare GT (Sl.No.6006970) was found earthed. The same was sent for

50

Generation loss of 3,917.51 MUs and 736.84 MUs due to shut down for 328 days and

operated at restricted load respectively. 51

4,654.35 MUs X ` 2.70 per unit 52

A core is piece of magnetic material with a high magnetic permeability use to confine and

guide magnetic field in electrical or electromechanical and magnetic device in transformer.


52

repair to M/s BHEL. In the meantime GT (Sl. No. 6006966) of Unit-2 was

tested (September 2016) for Dissolve Gas Analysis (DGA) by the Company

and abnormal formation of combustible gases was found in the sample of

which may cause the failure of GT at any time. As the spare GT

(Sl. No. 6006970) was not received back after repair, the Company replaced

defective GT (Sl. No. 6006966) with GT of Unit-1 on 17 November 2016 by

taking shutdown of Unit-2 from 10 November 2016 to 17 November 2016.

M/s BHEL rectified and returned to the Company GT (Sl. No. 6006970) in

August 2017 after lapse of 20 months. Further, a shutdown was proposed of

Unit-1 from 13 November 2017 to 17 November 2017 for replacement of

defective GT (Sl. No. 6006966)53

with the spare GT (Sl. No. 6006970) and the

same was replaced on 22 November 2017.

Audit observed (December 2018) that the spare GT was repaired after

abnormal delay of 20 months. Had the GT (Sl. No. 6006970) been rectified

within reasonable time, the defective GT (Sl. No. 6006966) of Unit-2 could

have been replaced with the repaired spare GT in place of being replaced with

GT of Unit-1 and subsequent shut down during the period 13 November 2017

to 23 November 2017 for 231.22 hours could have been avoided. However,

the Company failed to do so which has resulted in avoidable generation loss of

115.683 MUs valuing ` 31.23 crore54

.

The Government stated (October 2019) that the Company had made vigorous

persuasions and meetings with M/s BHEL to rectify the defects of spare GT.

The reply is factually incorrect as the problem in spare GT was found in

January 2016 but the Company requested (24 August 2016) to M/s BHEL to

repair the spare GT after lapse of eight months. Had the Company kept spare

GT in working condition, it could have avoided one shut down.

Ineffective Overhauling

2.9.4 Annual Overhauling (AOH) of Unit-2 of ABVTPS was done during

2017-18 (15 February 2018 to 7 March 2018). Unit-2 remained shut down for

556 hours (16 incidents of tripping) in 2017-18 before carrying out AOH and

after AOH it remained shut down for 1,008 hours (27 incidents of tripping)

during March 2018 to March 2019. The main object of AOH is to minimise

the tripping and save generation loss. But after AOH, number of tripping

actually increased by 68.75 per cent.

While accepting the observation the Government stated (October 2019) that

necessary instructions have been issued to make necessary rectification in the

operation and maintenance of the units to avoid tripping in future.

High rate of outages resulted in increased consumption of fuel oil, auxiliary

power and station heat rate against norms as discussed below:

Consumption of fuel oil in excess of norms valuing ` 47.72 crore

2.9.5 High Furnace Oil (HFO), LDO (Light Diesel Oil) and High Speed

Diesel (HSD) are used as starting or ignition fuel in thermal power plants. The

CSERC in provisional tariff (April 2016) for Unit-1 and Unit-2 prescribed

53

Which was installed in Unit-1 by repairing it at site after removal from Unit- 2. 54

115.683 MUs i.e. 11,56,83,000 units X ` 2.70 per unit = ` 31,23,44,100


53

norms for consumption of oil at 0.50 millilitre per kilowatt-hour (ml/kWh).

Against the prescribed norm, the average oil consumption ranged between

0.63 ml/kWh and 12.18 ml/kWh during 2016-17 to 2018-19. The ABVTPS

consumed excess of HFO and HSD to the extent of 11,989.35 kilolitre valuing

` 47.72 crore (as detailed in Annexure - 2.1).

Excess Auxiliary consumption of power

2.9.6 Energy consumed by power stations themselves for running their

equipments in common services is called auxiliary consumption. Norms

prescribed (30 April 2016) by CSERC in its Tariff Orders for auxiliary

consumption for ABVTPS was 5.25 per cent. Against norms the actual

auxiliary consumption ranged between 5.24 per cent and 20.03 per cent during

the period 2016-17 to 2018-19. With reference to CSERC norms, there was

excess consumption of 194.69 MUs which could have been transmitted to grid

and generated revenue of ` 52.57 crore55

.

Station Heat Rate

2.9.7 The Station Heat Rate (SHR) is an important index for assessing the

efficiency of a thermal power station. The heat rate of a power plant is the

amount of chemical energy that must be supplied to produce one unit of

electrical energy i.e. heat energy input in Kilocalorie (Kcal) required for

generating one Kilowatt-hour (kWh) of electrical energy. It should be the

endeavour of any station to operate the unit at as near its design Heat Rate as

possible.

The CSERC prescribed SHR of 2,378 Kcal/kWh while approving

(30 April 2016) provisional tariff order for Unit-1 and Unit-2 of ABVTPS.

The SHR was much higher i.e. 2,708 and 2,593 Kcal/kWh than the norm fixed

by CSERC during 2016-17 in respect of Unit-1 and Unit-2. The high SHR in

Unit- 1 and 2 during 2016-17 and 2017-18 resulted in excess consumption of

1.54 lakh MT coal valuing ` 37.69 crore (as detailed in Annexure - 2.2).

Avoidable payment of DSM Charges- ` 10.07 crore

2.9.8 Section 5 of the CERC {Deviation Settlement Mechanism (DSM) and

related matters} Regulations, 2014 stipulated that the seller shall pay the

charges56

for deviations in injection of power for all the time-blocks57

at the

rate specified in the Regulation.

Audit observed (December 2018) that the Company paid an amount of

` 10.07 crore58

on account of DSM charges as it failed to inject the scheduled

energy in the grid during the period May 2016 to March 2019. Resulted in

avoidable payment of ` 10.07 crore on account of DSM charges.


55

194.69 MUs X 10,00,000 X ` 2.70 per unit as fixed by CSERC 56

Work out on the basis of average frequency of a time-block at the rates specified in the

Regulation. 57

Means a time block of 15 minutes, for which specified electrical parameters and quantities

are recorded by special energy meter, with first time block starting at 00:00 hrs. 58

From April 2016 to March 2019


54

the main reasons for non-achievement of minimum generation were high

vibration in the turbine shaft, ash evacuation problem, poor quality or short

supply of coal, high percentage of dissolved gases in generator transformer

and tube leakages. The Government further stated that before closing of

contract, all the liabilities towards M/s BHEL and M/s BGR will be analysed

and appropriate action will be taken against them.

Recommendation:

The Company should make efforts to improve the PLF and achieve the

operational parameters fixed by the CSERC in respect of coal and oil

consumption to minimise cost of generation.

Environmental issues

2.10 Coal based power plants significantly impact the local environment.

Direct impacts resulting from construction and on-going operations include air

pollution (Sulphur Dioxide, Nitrogen Dioxide etc.), water pollution (Arsenic,

Fluoride etc.), land degradation (due to alterations of land used for storing fly

ash) and noise pollution.

The Ministry of Environment, Forest & Climate Change (MoEF&CC), GoI

accorded (February 2008) Environment Clearance (EC) to ABVTPS for a

period of five years to start production and the same was extended

(March 2016) for further five years i.e. upto February 2018. The Company is

required to comply with 35 conditions out of which in 17 cases there were

non-compliance of conditions of EC as detailed in Annexure - 2.3. However,

nothing was found on records of Chhattisgarh Environment Conservation

Board (CECB) to show that any action was taken against the Company for

non-compliance. Some of the major non-compliances are discussed as under:

Excess Stack Emission Standard

2.10.1 The Ministry of Environment, Forest and Climate Change, GoI

amended (December 2015) the “Environment (Protection) Rules, 1986” and

prescribed stack emission standards to be achieved within two years from the

date (7 December 2015) of publication of the notification for thermal power

stations. According to said notification, the level of Sulphur Dioxide should be

within 200 mg/Nm3 in stack emission/ambient air quality.

Audit observed (January 2019) that during January 2018 to November 2018,

as per records of the Plant there were 52 numbers of instances, when level of

Sulphur Dioxide was beyond the norm and ranged between 202.10 mg/Nm3

and 246.15 mg/Nm3 (1.05 per cent to 23.08 per cent) after two years from the

date of publication of the said notification.

The Government stated (October 2019) that new norm for level of sulphur

dioxide within 200 mg/Nm3 was applicable from 7 December 2015. As the

implementation of the project was conceived during 2007-12 period, the

designed parameter of the project components were finalised keeping in view

of norms applicable during the said period. The Government further stated that

the Company initiated necessary action to maintain the emission level of

sulphur dioxide within the norm.

Reply is not acceptable as the Company failed to maintain the emission level


55

of sulphur dioxide within the norm in prescribed time. Further, the Company

initiated (May 2019) action for installation of Flue Gas Dissolved system to

achieve the emission of flue gases as per the norms of MoEF &CC only after

lapse of more than three years after notification.

Excess level of noise pollution

2.10.2 According to the Noise Pollution (Regulation and Control) Rules,

2000, GoI, “Ambient air quality standards in respect of noise in industrial area

limits shall be in day time59

75 dBA60

and in night time61

70 dBA”. This

condition was also intimated (May 2008) by CECB in its permission to

establish.

Audit observed from the records of the Plant that in six62

out of 12 locations63

the monthly average noise level were beyond norm prescribed by

environmental authorities due to steam turbine generator, other rotating

equipment, combustion induced noises, flow induced noises and steam safety

valves. It ranged between 95.74 dBA and 83.64 dBA, against the prescribed

limit of 75 dBA for day time during the period August 2016 to March 2019.

However, the Company did not record the noise level at night. It was also

observed that in other plant64

of the Company noise level was within norm. To

achieve the above, noise emission from equipment be controlled at source, a

green belt should be developed around the plant area to diffuse noise

dispersion. However, the Company planted 1.28 lakh plants against the norms

of 3.38 lakh65

plants prescribed by MoEF&CC (February 2008).

The Government stated (October 2019) that as per noise level monitoring

report of 14 May 2019 various parameters have been measured at 12 different

identified locations of ABVTPS. Hence, the audit conclusion that the

Company had not recorded noise level at night is not correct.

Reply is not acceptable because as per records of the Company for the period

August 2016 to March 2019 the Company did not record the noise level at

night. Further, the Company did not address the excess level of noise pollution

in day time.

Environment Impact Assessment Report not prepared

2.10.3 While granting consent (31 March 2014) the CECB directed that “EIA

Report covering one year data (four seasons) shall be submitted to the CECB

within 15 months from date of commissioning of plant”. Audit observed

(January 2019) that the ABVTPS did not prepare any EIA Report even after

59

Day time shall mean from 6.00 am to 10.00 pm 60

A-weighted decibels, abbreviated as dBA, is an expression of the relative loudness of

sounds in air as perceived by the human ear. 61

Night time shall mean from 10.00 pm to 6.00 am 62

Turbine House, Air compressor area, Mill area, Boiler House, Crusher House and Cooling

Water Pump house 63

Turbine House, Air Compressor Area, Mill Area, ESP Area, Water Treatment Plant, Boiler

House, Crusher House, CHP area, CW Pump House, Main Gate, Hospital and Intake Pump

House. 64

Korba West Extension 65

Total plant area 225 hectare X 1,500 plants per hectare = 3,37,500 plants.


56

30 months from commissioning of plant in compliance of aforesaid condition.

In absence of EIA Report, the actual impact on environment due to operation

of the plant could not be ascertained.


Notice Inviting Tender (NIT) was issued (8 July 2019) for conducting of

Environment Impact Assessment at ABVTPS.

Non-compliance of ash utilisation norms of MoEF&CC

2.10.4 The Ministry of Environment, Forest and Climate Change

(MoEF&CC), GoI notified (25 January 2016) that the coal or lignite based

thermal power plants shall comply with the provision of 100 per cent

utilisation of fly ash generated by them before 31 December 2017.

Audit observed that during the period March 2016 to March 2019, ash

utilisation was 24.07 per cent only as against 100 per cent fly ash as per the

directions of MoEF&CC due to non-completion of approach road to the plant

for movement of heavy vehicles and non-uploading of fly ash availability data

on its website by SE (Civil-III), ABVTPS to enable users to collect/place

requisition for the ash. Further, no concerted efforts such as allotment of land

on nominal lease charge, concession on power consumption charges and

appropriate technical, managerial and marketing assistance were made by the

Company to improve the utilisation of ash, as envisaged in the DPR.

The Government stated (October 2019) that the Company filed case before

Supreme Court of India against 100 per cent ash utilisation.

The fact remains that ash utilisation was 24.07 per cent only as against

100 per cent.

Failure to fix reserve price of cenosphere

2.10.5 A cenosphere is a by product produced from the combustion of coal in

power stations formed from fuel ash. Normally cenosphere is produced to an

extent of 0.2 per cent to one per cent in fly ash. It is commercially useful as an

extender for plastic compounds, being compatible with plastisol, thermo-

plastics, latex, polyester, epoxies, phenol resins and urethanes. Synthetic

foams are also made with cenosphere. It is compatible with cement and other

building materials such as coatings and composites. It is used in a wide variety

of other products, including sports equipment, insulators, automobile bodies,

marine craft bodies, paints and fire and heat protection devices.

During April 2016 to March 2019, the ABVTPS had produced 40.62 lakh MT

of ash which should have contributed 8,124 MT (0.2 per cent on conservative

estimates) of cenosphere.

Audit observed (January 2019) that the Company issued (22 November 2017)

work order to contractor66

for collection of cenosphere, handling, processing,

transportation and disposal with eco-friendly manner from Ash dyke of

ABVTPS against revenue of ` 3.18 lakh per year. As the cenosphere, which

has high demand and value in the market and could have earned more revenue

66

Shri Haridas Bhu Visthapit Jan Kalyan Seva Samiti, Jurvey Janjgir-Champa

The Company failed

to earn revenue of

` 11.67 crore on

cenosphere due to

non-fixing of its

reserve price.

Ash utilisation was

24.07 per cent only

as against

100 per cent


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for the Company, it should have fixed reserve price/MT67

. Had the Company

awarded contract by fixing reserve price, it could have earned revenue to the

tune of ` 11.67 crore68

. Similarly, in other Plants also the Company failed to

fix reserve price and during 2016-17 to 2017-18 DSPM, TPS, Korba East

earned revenue of ` 6.26 lakh instead of ` 6.23 crore69

and Korba West

Extension, TPS earned revenue of ` 7.84 lakh instead of ` 6.16 crore70

.

The Government stated (October 2019) that the work of collection of

cenosphere was awarded to the cooperative society formed by the land oustees

for generation of their employment. The Government further stated that work

for collection of cenosphere was awarded to such cooperative society who

quoted highest rate.

Reply is not acceptable as the Company provided monthly allowances and

employment to land oustees hence, providing of work of collection of

cenosphere without safeguarding the financial interest of the Company lacks

justification. Further, in absence of fixing of reserve price by the Company the

highest rate received from cooperative societies were too meagre.

Non-commissioning of Sewage Treatment Plant (STP)

2.10.6 As per conditions of the renewal of consent issued (31 March 2016)

under section 25/26 of the Water (Prevention and Control of Pollution) Act,

1974 by CECB “Industry shall commission Sewage Treatment Plant (STP) for

treatment of domestic effluent within six months positively”.

Audit observed (January 2019) that the ABVTPS had not commissioned any

sewage treatment plant71

for treatment of domestic effluent at its residential

area till date (May 2019) in compliance of aforesaid conditions of CECB even

after lapse of 30 months. Reasons for the same were not on the records of the

Company.


consultant was appointed to prepare DPR for installation of STP at residential

area.

Recommendation:

The Company should ensure strict adherence to the environmental acts

and regulations.

Internal Control and Monitoring

2.11 Internal control is a management tool used to provide reasonable

assurance that the objectives of the organisation are being achieved in an

efficient, effective and orderly manner. Deficiencies in the internal control

system and monitoring mechanism are discussed below:

67

The Kothagudam Thermal Power Station, Telangana sold at a rate of ` 14,360 per MT. 68 ` 14,360/MT x 8,124 MT 69

0.2 per cent of 21,71,023 MT X ` 14,360/MT 70

0.2 per cent of 21,47,070 MT X ` 14,360/MT 71

Cost involved ` 3.04 crore


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Non-preparation of works manual

2.11.1 The Company was incorporated in May 2003. The Company executed

different types of civil work at its power stations including ABVTPS such as

construction of roads, culverts, garden, residential quarters and supervision of

the work of BTG/ BOP contractors. In this connection it was observed

(January 2019) that the Company neither prepared its own works manual nor it

adopted Public Works Department (PWD), GoCG manual. As a result of this

the Company did not maintain any hindrance register consequently contracts

could not be closed till date.

The Government stated (October 2019) that the Works Manual would be

prepared at the earliest.

Non-submission of Utilisation Certificate

2.11.2 The works under Corporate Social Responsibility (CSR) for project

affected people were carried out by the Company through local administration.

In this connection, Audit observed (December 2018) that during the period of

2009-10 to 2018-19, 56 works valuing ` 6.62 crore were executed through the

local administration, Janjgir-Champa for which no Utilisation Certificate (UC)

were received so far (January 2019). As a result the Company could not assess

the status of fund utilisation as well as progress of work.

The Government stated (October 2019) that efforts are being made to obtain

UCs from the District Authorities and UC of ` 2.77 crore has been received.

The fact remains that UC of ` 3.85 crore is not yet received.

Non-conducting of Energy Audit

2.11.3 As per provisions of Energy Conservation Act, 2001 (Act), all energy

intensive industries should get their units audited by accredited energy

auditors. Further, as per notification of Bureau of Energy Efficiency

dated 28 April 2010, stipulated that every designated consumer shall have its

first energy audit conducted, by an accredited energy auditor within 18 months

of the notification issued by the Central Government.

Audit observed (January 2019) that the Company was to get the energy audit

conducted for Unit-1 and Unit-2 within 18 months from date of COD

i.e. September 2017 and January 2018, but no energy audit had been

conducted for these two units so far (March 2019). As a result of which the

Company was deprived from the benefit of the energy audit besides violation

of the provisions of the Energy Conservation Act, 2001.

The Government stated (October 2019) that the consultant was appointed

(July 2019) to conduct energy audit.

The fact remains that energy audit was not conducted within stipulated time of

September 2017 and January 2018 for Unit-1 and Unit-2 respectively and

same was initiated by the Company on being pointed out by audit.

Deficient and ineffective internal audit system

2.11.4 Internal Audit (IA) is an independent management function and


59

involves a continuous and critical appraisal of the functioning of an entity with

a view to suggest improvements thereto and add value to and strengthen the

overall governance mechanism of the Company. In this connection Audit

observed (December 2018) the Company had no internal audit wing of its own

and it had also not prepared internal audit manual so far. The IA of ABVTPS

was conducted (April 2017) upto 2016-17 by the Chartered Accountants

appointed by the ED (Finance). The internal audit did not cover the core area

of the project like preparation of DPR, terms and conditions of major

contracts, funds arrangement for project, compliance of statutory

requirements, execution of projects and operational efficiency. Further,

internal audit reports were not placed to the BoDs for perusal.

The Government stated (October 2019) that the internal audit report would be

submitted to the BoDs, in future.

Plant remained uninsured post COD

2.11.5 The main objective of insurance is to provide protection and mitigate

risk. It was observed (January 2019) that the COD of Unit-1 and Unit-2 was

carried out on 31 March 2016 and 31 July 2016 respectively and no insurance

of the plant was covered. It was primary responsibility of the Company to take

insurance of the plant but the Company did not take any insurance coverage of

the complete plant. It was pertinent to mention here that the Company had

already suffered a major setback in 14 July 2015 as fire accident occurred at

crusher house which resulted in slippage of schedule of completion of

facilities/COD by seven months for both the Units and it had to incur

generation loss of 5,352 MUs. It should have learnt lesson from the past

experience however, no action had been taken by the Company in this regard.

It is pertinent to mention here that Damodar Valley Corporation and West

Bengal Power Development Corporation Limited insured the generating

plants.

The Government stated (October 2019) that the ABVTPS along with other

plants of the Company would be insured shortly.

Non- monitoring of project through SAP-ERP system

2.11.6 Office of the Chief Engineer, Energy Info Tech Centre72

(EITC) assists

the Company to carry out its financial, operational and other activities through

SAP-ERP system. However, the following shortcomings were observed

(January 2019) in connection with the monitoring through SAP-ERP system

over the construction activities carried out in ABVTPS, Marwa:

The SAP is a transaction based software and based on which reports are

generated in the system. However, work flow module was not

implemented in the SAP. Hence, the approval levels were not in place for

Vendor Billing Process.

There was no provision in the SAP-ERP system to ensure that payment

was made only after verifying all the terms and conditions of the contracts

instead the bills were passed manually and it depended upon the bill

passing authority to adhere to the terms and conditions of the contract.

72

Chief Engineer is head of wing


60

There was no provision in the SAP-ERP system to ensure that penalty was

deducted automatically if there is delay in completion of works/ supply

beyond the scheduled time. Though the commissioning of the project was

delayed by 44 months the Company did not deduct any penalty.

There was no check in the SAP-ERP system to monitor performance based

penalty if any shortfall occurred in the execution/ performance of the

work. The cooling tower failed to give guaranteed performance of outlet

temperature of 33°C however, the Company did not impose any penalty.

There was no provision in the SAP system to review validity of BG time to

time. It was observed that bank guarantee (01310100003179) had expired

on 30 September 2017 but it was renewed only on 6 November 2017 after

lapse of 36 days.

There was no provision in the SAP system to check security deposit (SD)

was obtained within the stipulated time mentioned in the contract

agreement.

There was no provision in the SAP-ERP system to restrict the vendor to

convert the earnest money into security deposit.

There was nothing to ensure that no running account bill was passed

without realising security deposit in advance.

The above deficiencies in the SAP-ERP system were mainly due to failure of

the Company to design and implement customised system as per its

requirement. It implemented manual system without proper work flow module

as a result the transactions entered manually in the SAP-ERP system only was

displayed in the system.

The Government stated (October 2019) that to meet the shortcomings pointed

out by audit, appropriate work flow module would be developed in near

future.

Recommendation:

The Company should strengthen its internal control and monitoring

mechanisms relating to pre-execution activities, execution of project,

compliance of terms and conditions through SAP-ERP system.

Conclusion

The Company did not conduct detailed survey or verify the revenue

records of land to assess the nature of land to ensure correctness of DPR.

Due to it the Company acquired total 1,728.73 acre land out of which only

283.77 acre (16.41 per cent) land was barren and remaining 1,444.96 acre

(83.59 per cent) was agricultural land. As a result 15 Rehabilitation and

Resettlement (R&R) issues, protest of land oustees, strike, kaamroko,

talabandi took place which hampered the project work.

As per the terms and condition of BTG and BOP contract 95/90 per cent

advance payment ` 2,600.42 crore towards supply was released without

linking with erection and the contractors showed very little interest in

completion of erection work resulting in delay in completion of condenser

erection, TG erection, steam blowing activity, CHP, AHP etc. as on


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schedule date of completion only 36.82 per cent/40.37 per cent erection

work was completed.

Unit-1 and Unit-2 of ABVTPS was to be completed by 30 September 2012

and 30 November 2012, however, the same was completed on

31 March 2016 and 31 July 2016 with delay of 42 and 44 months

respectively due to delay in execution of agreement, supply of materials,

awarding and completion of BTG civil work and completion of BOP work.

Delay in commissioning of Plant led to potential generation loss of

16,440.07 MUs value of ` 4,438.82 crore, deprival of a rebate on interest

of ` 17.95 crore on PFC loan and cost overrun of ` 3,772.67 crore due to

increase in Interest during Construction (IDC) on loan, cost of BTG and

BOP works, cost of land acquisition and Rehabilitation and Resettlement

expenditure.

The Company did not recover the liquidated damages of ` 339.31 crore

from the defaulting contractors due to non-closure of contracts.

Even after commissioning of the both the units of the Power Plant the

Company failed to achieve the objective of generation of at least 850 MW

(at 85 per cent Plant Load Factor) per hour power it could generate only

575 MW per hour. Consequently the Company could not attain the

generation target and there was shortfall in generation of 6,345.53 MUs

power valuing ` 1,713.29 crore. Main reasons for poor operational

performance was high rate of outages due to installation of defective

turbine, non availability of GT spares and ineffective overhauling, as well

as excess consumption of fuel, auxiliary consumption and coal against the

CSERC norms which led to extra expenditure of ` 85.41 crore.

Non adherence to the provision of environmental Acts, regulations and

norms resulted in non-achievement of specified stack emission levels,

noise level and disposal of ash which adversely affected the environment.

Despite having sufficient manpower, lack of effective internal control and

monitoring mechanism led to non-preparation of works manual, non-

conducting of energy audit, deficient internal audit system, non-insurance

of plant and deficient SAP-ERP system.

Vajpayee Thermal Power Station, Marwa” of Chhattisgarh ...

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